Only the strong survive.
This story first appeared in the December 5, 2014 issue of WWD. Subscribe Today.
So who will stay and who will go? That is the question hanging over beauty box subscription services.
Glossybox, Birchbox, Beauty Army, Beauty DNA, Beauty Bar Allure Sample Society, Beauty Box 5, Beauty Fix, Curlbox, Memebox, New Beauty TestTube, Target Beauty Box, Total Beauty Collection, the beauty box subscription list goes on and on and on. “The level of detail that it takes to make a customer experience is amazing,” observed Jane Park, chief executive officer and founder of Julep, a monobrand marketer and subscription service. “It’s a lot harder to accomplish at scale than what people might expect. Not everybody who starts one of these companies will have all these things. We’ll see a shakeout, because that’s what happens in every space.”
Industry sources estimate that the beauty box subscription market amounts to $20 million to $25 million a month.
“Less than 5 percent [of consumers] go to a beauty box to make their [product] choice,” said Karen Grant, vice president and global industry analyst at the NPD Group Inc. “[But] those who receive a box are highly influenced to buy. Over 90 percent of [consumers] will buy a product from it.”
While the future may be promising for the box subscription-service model, not everyone will have it made. Since the market is inundated with boxes, companies need to find a way to differentiate themselves from the rest.
Glossybox, which costs $21 a month and strictly supplies prestige brands, views itself as a marketing platform for the cosmetics industry.
“Our purpose is to provide storytelling for beauty brands and a beauty-discovering platform for consumers,” said Elian Pres-Gurwits, president and managing director of Glossybox. “Since brands are not required to sell products on our platform [Web site], we’re able to redirect all traffic to the brand channel of choice. While we invest and drive sales for our partner brands, we’re not capitalizing on them, we are not generating any revenue from that sale.”
Glossybox makes money by charging consumers for the subscription service. The brands that provide samples give them to the company for free. According to Pres-Gurwits, 89 percent of brands that the company has worked with would provide samples for Glossybox again. Glossybox has also grown more than 50 percent in the past year and globally, it sells one box every 12 seconds.
“Brands are reallocating their marketing budgets to achieve the sales and p.r. objectives they once did through traditional channels,” he noted. This explains why an overload of beauty boxes has exploded onto the market. It’s cheaper for brands to get the word out about their product rather than spend money on a million-dollar ad campaign.
Birchbox, on the other hand, which serves as an e-commerce site, initially didn’t set out to sell people samples in a box.
“We are an e-commerce store, but our whole business goal is to get the consumer excited enough to purchase the product,” said Katia Beauchamp, cofounder of Birchbox, who added that people who aren’t typically as excited by the beauty category are signing up or getting gifted Birchbox. “Through the non-beauty enthusiasts’ experiences with Birchbox, they are actually doubling their spending in the category.”
According to industry sources, one brand on Birchbox generated $1 million in sales for the year via birchbox.com. But at Sephora, the brand made less.
In July, Birchbox opened its first standalone store to see how the model could translate offline. “It’s all an attempt of enhancing the online experience,” added Beauchamp. “We’re continuing to expand our footprint and we [deliver] now in six countries [U.S., Canada, France, U.K., Spain and Belgium.]”
In May, Birchbox had more than 800,000 subscribers per month and 30 percent of its business revenue came from e-commerce. That number of subscribers translates into more than $8 million in monthly sales. Additionally, 50 percent of Birchbox’s subscribers go on to make a full-size purchase in its online shop. No wonder Birchbox sticks out among the rest.
Another major player in the beauty box sector is the Ipsy “Glam Bag,” which was cofounded by successful beauty vlogger Michelle Phan. “Ipsy is not just a sampling program,” said Phan of the $10-a-month service that features a unique theme for every mailing. “Anyone can go to a beauty department and request free samples. Not only do subscribers receive an assortment of products each month, but also substantial video content from myself and other beauty stylists who are using and demonstrating how to use every single product.”
Although Ipsy seems to be a bit more under the radar compared to Glossybox and Birchbox, its subscription rate is higher than most and tends to attract a younger consumer. According to Jennifer Goldfarb, cofounder and president of Ipsy, the company will hit nearly a million subscribers by early next year.
“The monthly products fuel community dialog and from this, social media content and YouTube beauty videos are created,” said Goldfarb, who added that last spring, the company opened Ipsy Studios in Los Angeles where vloggers and beauty stylists create content for the Ipsy community.
But they can’t all be winners.
“There is some box fatigue,” said Alicia Yoon, cofounder of Peach and Lily, a Web site that sells beauty products exclusively from her travels to Japan and Korea. “If the quality of the boxes change or decrease, consumers will get pretty exasperated by that. After your fifth or seventh box, the novelty of getting something in box form will wear off.”
Coordinating with Peach and Lily’s business model of bringing the best of Korean and Japanese beauty products to the U.S. consumer, Yoon and her partner Cindy Kim have created their own mailing called Seoulcialite Box.
The box, which is $49 and valued at $150, is not a monthly subscription as of yet, but it contains six full-size products from Kim and Yoon’s latest trip to Asia. Once the box sells out on peachandlily.com the products go live on the site. “Every time we go back and beauty hunt in Korea there’s so much going on and we’re really trying to narrow in on the best,” said Yoon. “[The box] is really a reward model for consumers who are going to discover alongside us.”
While multibrand boxes are crowding the market and a plethora of copycats are on the horizon, singular beauty brands are launching their own services for diehard fans.
L’Occitane, which launched its first L’Occibox on Monday in collaboration with Elle Magazine, is planning to distribute a box quarterly in its physical retail locations.
“Our model is about exposing customers to a wider selection of our products,” said David Boynton, chief executive officer of L’Occitane Inc.
To that end, Julep Maven, which is the monthly box model for Julep, is delivered to the consumer before the retailer.
“You’re getting something new that hasn’t hit the market and you’re getting it at the same time as everybody else,” said Park of Julep. “In today’s era, where instant revolves around everything, there’s few times when we’re all doing the same thing.”
Julep launches its new products to its community of mavens, who then tell the company what should be considered an ongoing stockkeeping unit and which is one and done.
“The company that does the best job in delighting their customers will continue to grow,” said Park. “If you want to copycat what exists, that is harder than coming up with an unusual innovative idea from scratch.”
Anne-Marie Faiola, ceo and founder of Handmade Beauty Box, has fashioned a unique and experiential DIY box concept that launches on Dec. 10.
Priced at $30 a month, Handmade Beauty Box comes with premeasured ingredients so consumers can make their own products, such as mineral makeup, salt scrubs and nail polish.
Although Faiola is coming into the category where boxes are all the buzz and the market is as crowded as ever, she believes that the model will survive.
“As a busy mom, I subscribe to both beauty boxes for myself and also crafting boxes for my kids,” she said. “I’m constantly looking for shortcuts that help me have experiences as a family and boxes make it easy for me as a parent. [Plus, beauty boxes] make it easy for me to try stuff without going in store.”
Meanwhile, other brands like E.l.f. and Laqa & Co. have created a subscription service too.
E.l.f., which sends out a differently designed beauty box every other month, includes full-size product, like sneak peaks before items go into stores and a palette or gift set.
“[Our subscribers] prove to be more loyal and they’re purchasing more often outside of the box subscription,” said Joey Shamah, ceo of E.l.f., who added that customization within the boxes is how he sees boxes evolving.
Another brand with a monthly mailing is Laqa & Co.’s Color of the Month, which includes a full-size nail polish not yet on the market and nail polish remover pads for $10.
“[The Birchbox] customer is looking to find new stuff all the time and they won’t always love everything they get in their box. It’s all discovery,” said Nicole Lee, cofounder of Laqa & Co. “With us, you know who we are. Maybe you got one of our products in Birchbox and you know you like our products.”
Huckleberry, another subscription service, sends out single-serving facial products either weekly, $10, biweekly, $12, or monthly, $15.
“Our subscription is pretty fundamental to our business,” said Joyce Chow, founder and ceo of Huckleberry. “[Facial] products are generally used once. Between 85 percent to 95 percent of women [that we surveyed] said they finished the rest of their skin-care regimen before they bought a new one. But for face masks, nearly zero percent came back and said they finished it because it comes in such a large jar, gets stored in a cabinet and then it goes bad.”
While Huckleberry currently operates on word of mouth, Chow doesn’t see other services as competition. “The type of people who would get Birchbox or Glossybox is generally different than what we’re targeting,” noted Chow. “The type of consumer that we’re trying to find is somebody that wants something that works particularly well for them and they’re sticking to it.”
Does the box model have potential for longevity? Definitely — but the company better stand out from the rest.
“We arrived at subscription polled by the customer, but you can’t just take anything and make it a subscription,” said Park. “People forget the technology has to be awesome because at the end of the day you still have to start with the customer experience.”